Banking group head: ‘Sometimes, it’s better if Congress does nothing’

Hunt represents some of the businesses most squarely in regulators’ targets: Big banks such as Chase, Bank of America, and Wells Fargo.

In response to the financial crisis, Congress passed the 2010 Dodd-Frank law, which included major new regulations on mortgages and other banking products used by individuals and families. It also created the Consumer Financial Protection Bureau to enforce the rules and gave its director broad discretion to police markets as he sees fit.

The CFPB is a major target for Hunt — but not for elimination, as many conservatives want. Instead, his group wants to turn it into a bipartisan, five-member commission, so that its policies don’t change too much depending on who’s in the Oval Office. The agency currently is being run on an acting basis by conservative Mick Mulvaney.

One of the agency’s rules, the first federal regulations on payday loans, could prove an obstacle to bankers hoping to edge their way into short-term, small-dollar loans, taking over from payday lenders and other nonbanks.

Also near the top of the bankers’ agenda is getting Trump administration regulators to revise the Community Reinvestment Act, the 40 year-old law that requires agencies to spur banks to lend in or otherwise aid poor and moderate-income areas.

Hunt, a Louisianan and one-time GOP staffer who has led the group since 2009, is responsible for helping to get those items crossed off the list. But in an interview with the Washington Examiner, he underlined that it’s about seeking out compromise on regulation, not eliminating it. The interview has been edited for length and clarity.

‘We need to have’ regulation

Richard Hunt: We just want to make sure that we don’t have the pendulum continue to swing left to right, left to right. We need certainty and stability in the middle, so the banking industry can have certainty, it can invest in products and technology, not having to worry about the next political election.

And I think that’s what sometimes members of Congress get wrong, and certainly the consumer groups get wrong. We’re all about regulation. We need to have that. We’ve had it since 1862. Now, did the last administration and the last regulatory heads go too far? Yes, they did. And we’re just trying to say to the new people, don’t go too far to the right, either. Let’s try to have a balance of the two.

Washington Examiner: You just launched right into that. You caught me a little off-guard. But that’s alright.

Hunt: The other thing I would tell you is this is a fascinating time in banking. Probably the most fascinating time you can think about with, yes, Dodd-Frank, getting through that. We’re coming off a nine-year recession if you will, with low interest rates. But the new world of technology. A person can do 99 percent of their banking on their iPhone. The only thing they can’t do on their iPhone — yet — is dispense cash. That’s it. I don’t think that day’s coming, but that’s probably the only thing you cannot do [on a phone].

The iPhone, I think, catapulted technology in the banking system more than anything else. So, this is fascinating — a banker must decide: Do you want to build branches, or do you want to go digital?

Right now, the consumer is saying, “I want both.” They want to do the digital means, but yet, at the same time, they want to go to the local branch. So, it’s just a fascinating time. It’s a chess game being played. And 5,000 banks across this country, from the community banks — which we don’t represent — to the larger banks that we do, it’s just a fascinating time to go through it.

Washington Examiner: Let me pivot off that point as it relates to one of the things I know you’re very active on right now, namely the Community Reinvestment Act — getting that addressed. Treasury has proposed some changes. How does that affect you, how it’s changing?

Hunt: Quite a bit. We’re all in favor of community reinvestment. Our banks do that on a daily basis. Not because we’re necessarily mandated to do it, but because we want to do it. The community has to be vibrant and strong for us to exist.

However, we can now invest in our communities different ways than we did in the past, via digitally. In the old days, you had a bank branch and probably drew a circle of one mile around that bank branch and said, that’s our community. Well, now we can reach people across the country via digitally that we may not have a branch in, but we can still help out that community.

A person born today should be able to have the same telephone number from birth to death, as well as the same bank.

You can easily deposit a check into an ATM. You can transfer money from phone to phone. And you can deposit a check as well. All of those things adding up, meaning you can have one bank from birth to death. And there’s some communities that have an over-influence of community reinvestment. Why wouldn’t we want to help a community that we may not have a branch presence in, but they still need help? I’m hoping that’s one of the things [the Office of the Comptroller of the Currency] and [the Federal Reserve] and the [Federal Deposit Insurance Corporation] allow us to do. To think outside of the bill that was written some 25 years ago and think in a 21st-century way.

We certainly do not want to become a Blockbuster — I don’t know if you know what Blockbuster is… There has to be different ways to do it.

So far, I am pleasantly surprised the community groups have even gotten on board with these plans. We’re hoping very soon … when I say very soon — by the end of the year, we’ll have a new way of investing in our communities.

New regulators

Washington Examiner: Let me go back to the point you made right at the outset, namely, it’s an interesting time.

Hunt: Fascinating time.

Washington Examiner: Fascinating time, not just in banking, but here in D.C. And you had a backlog of issues you wanted to address, I assume, coming into this Congress. How do you think it’s gone so far, and how do you think it’s looking before the end of the year?

Hunt: Mostly well.

I think we had a big win in the industry on something called arbitration. The CFPB wrote an egregious rule that was overturned by the U.S. Congress. We won in a landslide fashion — 51 to 50 in the U.S. Senate. So, there’s some checks and balances at least in that avenue of the CFPB. So, that’s been good.

We’ve got new heads of the regulatory agencies who actually understand business. And that has been refreshing. Of late, we’ve had regulators who have never worked in the private sector, who’ve never met a payroll. They’ve never had that knowledge base of what it takes to exist as a bank.

Joseph Otting now at the OCC, who’s been in the banking business for many years, understands both the banking and marketplace, and consumer protection. That has been a breath of fresh air for us all.

Jelena McWilliams will be coming in at the FDIC as well, also coming from a banking background. And then Randy Quarles, at the Fed, who has extensive banking background, too.

Look, this is a great opportunity for the banking industry and the consumer groups to work together. It shouldn’t be banking versus consumer groups. They can work together, and they have, mostly in the past. But the last nine or 10 years has not been very good for the banking industry’s relationship with consumer groups. And that has to change.

Competing for payday lending customers

Hunt: And there’s some issues we want to take care of — small-dollar lending. The Washington-mentality-knows-best took over the last couple of years. If you get outside Washington, D.C., you will see that about 60 percent of all people in this country do not have enough money in their savings account to meet a financial need, a financial emergency. That’s according to the Fed out of Richmond, Va.

So, every once in a while, someone’s got a flat tire. Somebody’s car has broken down. Sometimes, they’ve got a family emergency medical bill they have to take care of. And many of these customers had gone to the banking industry to help them fulfill that gap.

Well, along comes the FDIC and the OCC and says: “Mr. and Mrs. Banker, you cannot offer that product any more to that person who’s in need.”

So, we had to get out of that business. Where do those people go to today? They go to the payday lender. Which is much more expensive than going into the banking system. Or, they rack up enormous charges, maybe a credit bill as well, because they don’t have a great credit rating score.

So, we’re hoping now these new regulators will come in and say, “You know what? We want people in a heavily regulated industry like banking to have a lower-cost product.”

We got beat over the head in the banking industry when the regulators got rid of that product. Our customers were mad at us. And they couldn’t understand why the government would force us out of that business. So, they complained to the CFPB that we’re no longer offering this product, and the CFPB then got mad at us for having so many more negative comments at the bank, although it’s the government who caused it in the first place.

We’re hoping a little more sanity comes back into the regulatory arena that allows people who just had a bad day maybe and need help from the banking industry.

Washington Examiner: Let me ask about that. There’s two parts to that you touched on. One is the bank regulators, for instance the OCC, so what would they have to do in order for banks to …

Hunt: The OCC has done it, they issued a guidance, which is a code word for a rule. And they removed that guidance, and that’s fine. I think the FDIC very soon will release their own guidance. But then, you’ve got the CFPB.

You just hit the nail on the head that we’ve got three regulators overseeing this one little product — a very important product, but still very small in the scheme of things.

The CFPB came out with a rule that bifurcated consumer protection. It said if you do less than 2,500 loans, you have this set of rules, and if you do more than 2,500 loans, you have this set of rules. That’s just wrong.

CVS should have the same safeguards on Advil as does Ellie’s Drugstore in Mayberry, N.C. And they do. But not in the banking industry. Basically, former director Richard Cordray played politics with it. I’m hoping the CFPB will either get rid of the rule, or rewrite the rule, that will allow bigger banks to get back in to what we call deposit advance products.

The CFPB vs. bankers

Washington Examiner: More generally on the CFPB: That’s the agency that regulates a lot of what your members do.

Hunt: That’s right. Virtually everything we do.

Washington Examiner: Virtually everything you do. What’s the overarching issue?

Hunt: First off, we need to de-politicize the CFPB. It’s a donnybrook circus at the CFPB with the leadership change of late.

Every other agency in this town has an orderly transition of power. Not at the CFPB. We’re still in the court system right now still trying to officially decide who’s in charge of the CFPB.

Right now, you’ve got about 1,600 people at the CFPB doing almost absolutely nothing, because they don’t like the head of the agency. Maybe that’s too broad, maybe it’s only 1,000 people doing nothing. But half of the people at the CFPB work from home.

Even if you wanted to eliminate a person’s position, it would take a two-year grieving process.

The way I look at it is it’s 1,600 unionized people at the CPFB vs. probably 10 people that Mick Mulvaney has brought in. It’s David vs. Goliath at the CFPB. It cannot operate like that long-term. That’s why we’ve been pushing for a five-person bipartisan commission at the CFPB that virtually every agency at this town has under their leadership structure.

So when Mr. Mulvaney does leave or President Trump leaves, and a Democrat comes in, they can name their own person, but you have continuity with the five-person bipartisan commission like everyone else has. This is not going to happen at the FDIC. Did not happen at the SEC, or at the Fed, or at anywhere else. It’s just embarrassing.

Unfortunately, I think the Republicans in ’18, are acting a little bit like the Democrats in ’16, thinking they’re going to be in power forever. And the Democrats woke up on Nov. 9 in 2016 into a very different world, and I think some Republicans in the U.S. Senate and Congress believe they’re going to have the majority for as far as the eye can see. It’s not going to happen. We don’t know. But you shouldn’t play games with the CFPB or any other agency.

Washington Examiner: I take your point. But as for how he’s doing on the merits, how would you rate Mick Mulvaney?

Hunt: Mick Mulvaney — I think any time someone comes into an agency, they’ve got to take a timeout and take a look at everything. They’ve got to take a full inventory. My guess is that’s where Mick Mulvaney is today. He’s gotta see — how does an enforcement process work? What is the level of guilt one must reach before the level of fine? Has there been a thorough background on the entire process? My guess is, that’s what he’s going through.

Look, we know there’s going to be enforcement policies. There should be some enforcements. I just believe they’re down the road, not too far down the road.

But he’s only been there since the middle of November. He’s looking at about seven years of history, about processes. You know, I was just shocked when he said the other day he’s never seen Leandra English, the so-called former deputy director of the CFPB.

Washington Examiner She’s the other one you mentioned who’s claiming [to be the rightful acting director under federal law].

Hunt: Claiming, right. But the fact they haven’t seen each other, tells me this is out of whack.

Washington Examiner: So, you think he’s doing …

Hunt: The jury’s still out. It’s too early. He’s only been there six months, I’ve said from day one you’ve got to give somebody a year to find out what’s going on. I do believe he’s going to bring a fairer sense of balance between the agency of today versus the CFPB under Richard Cordray.

Director Cordray made that a political agency. No doubt about it. The fact that only one person did not support Hillary Clinton? That’s just wrong. You need an agency with a diverse set of views. Both pro-consumer, pro-banking, Democrat, Republican — across the board. You can’t have it 99 percent to 1 percent anywhere.

The laundry list

Washington Examiner: As for the political environment — looks like, as you mentioned, Republicans might not have the majority forever, might lose it this year. How do you plan for the prospects of things changing significantly? Is there anything that needs to happen legislatively this year?

Hunt: A good first step is the Crapo bill [the Senate banking legislation]. I don’t think that that will be a grand slam for the community banks by any means whatsoever. I still think the low interest rate environment and technology investment has really hurt community banks and driven consolidation. I think this will help a little bit. So, that needs to be done; the Crapo bill needs to be passed. I wish the House of Representatives would take it up yesterday and pass it so we can move on and get to 60-something votes in the Senate and get on with life — they already got the 60 votes — and have the president sign the bill, quickly. That’s A, number 1.

I’m hoping on the regulatory side and we have small dollar lending, CRA, should be done immediately …

Washington Examiner: Congressional Review Act, yeah.

Hunt: No, the Community Reinvestment Act. … Yeah, those are some of the items. I think there’s going to be more work done on the regulatory side than on the legislative side. Sometimes, it’s better if Congress does nothing, just leave it alone, and let the regulators try and work it out.